28th September 2016 Peter LYE
In “Secrets
and agents”, the Economist narrated how airlines are
leveraging the theory of information asymmetry grand fathered by George Akerlof
who finally won a Nobel Prize in economics in 2001 after agonizing for nearly
four decades after he wrote “The Market for Lemons” which was rejected by three
leading journals. He might more easily be identified as the husband of Janet Yellen chairman, Federal Reserve Board although he is definitely a man in his
own right. Some wonder the major topic of their pillow talk when these two bed
fellows dissertated on lemons and unemployment?
Air-conditioning has been effectively used
as a primary pricing differentiator as Mr. Lee Kuan Yew himself admittedly
responded that air conditioning was the greatest invention of this century in a
2001 RTHK interview. In temperate
climates and beyond, air-conditioning is a must as winter chill can kill. In
the tropics, air-conditioning can be a difficult luxury to forgo especially for
sick patients with Singapore being nick named an air-conditioned city. Why
deprive our sick when it is all and sundry at most public locations including
public offices when the incremental cost can be marginal in buildings that are
already equipped to be centrally air-conditioned?
Before posthumous arrows gets directed at
him, recognition must be accorded to his practical wisdom in leveraging on
airline pricing model that rest partly on Akerlof Information Asymmetry although
doubts abound that the two are or can be placed in the same room as no references
were made to these academic and commercial exploits in his governmental policy.
Public healthcare pricing and subsidy
rationing pre 1970s was primarily a non-issue because the middle class was not a
sizable addressable market and public healthcare was the backbone of the
healthcare system and private healthcare the preserve of the local rich and the well-heeled
medical tourist from neighbouring countries. Even at public healthcare, the A
class wards were lightly used and C class wards were the norm. The major
differentiator between the classes were creature comforts like
air-conditioning, private rooms instead of open wards, quality of food not in
terms of nutrition but taste and presentation as most hospital meals are
dietician directed.
With an ageing population over the horizon,
rapid development of medical technology and cost as well as the populace expectation
on healthcare, the government most probably predicted that the existing
healthcare infrastructure would have to undergo rapid modernization and
expansion and the framework to fund it is also not tenable and demanded a fundamental
structural change.
The Central
Provident Fund (CPF) as the national retirement fund liberalised the use of
its fund for healthcare needs through the creation of a separate Medisave Account in 1984 as one of the baby steps. The tables were turned quickly with a
sudden frenzied feeding demand for A and B class wards and an emptying out of C
class wards. Such was the situation with the waiting list for A and B class
wards that resulted in an unprecedented non-medical transfer of patients
between wards. Many felt that CPF funds are so tightly locked up and why not
use it when you can initially.
Between 1984 and now, healthcare financing has
been a regular topic of public discourse and subsequent legislative changes to
re-calibrate with the changing spectrum of demography in terms of age profile
as well as citizens, permanent residents and foreign talents as the latter two
begin to expand more rapidly. Of these measures, three defining progressive landmarks
are worthy of mention.
First, the introduction of nation-wide voluntary
opt-out basic medical insurance name MediShield in 1990, means testing of healthcare
subsidy to lower B2 and C class wards to ration subsidy to the more
economically needy and lastly, the almost seamless and unnatural quiet implementation
of compulsory universal basic health insurance on 1st November 2015.
The 1990 voluntary opt out MediShield most
probably had limited subscription and success that demanded the last measure in 1st November 2015. This rebirth has many laudable features such as being
universal, it is available to all regardless of their medical state as well as
a government cum private insurer initiative to address the issue of duplicity
of insurance coverage for those with existing insurance coverage with private
insurer to a dove-tailed and more cost efficient Integrated MediShield Life Plan. Such
knows no other precedent in other countries to learn from and demanded
threading on untested waters and it is a deserving of accolades.
A similar initiative in USA known commonly
as Obama Care which has been debated to death in public forums as well as the
senate and congress, supported and jeopardized by many camps and worthy of a
congress vs the president by majority and veto respectively. Perhaps the
ability to side-line to a later phase most of the duplicity for employer provided
healthcare insurance is the reason for the success as a large quantum of
healthcare is employer provided in USA.
As for the means testing to ration health
care subsidy to the more economically needy, it could have been a knee jerk
reaction to ministerial observation from some quarters that some seemingly
wealthy patients are having their expensive heart procedures done at C class
ward to save cost. Means testing is a robust sociological tool for government
subsidy rationing but wonder whether it is worthwhile as it is not common
enough to sight a billionaire like Ingvar Kamprad of Ikea who proudly proclaims
that he travels on commercial airline economy class. We certainly do not see
airlines reacting to it. On the reverse, such mean testing can land the
sandwich class into medically induced bankruptcy or close to it.
lkypeter@gmail.com Safe Harbor. Please note that information contained in these pages are of a personal nature and does not necessarily reflect that of any companies, organizations or individuals. In addition, some of these opinions are of a forward looking nature. Lastly the facts and opinions contained in these pages might not have been verified for correctness, so please use with caution. Happy Reading. Peter Lye (c) Peter Lye 2014